Sampson Steel produces high-quality worktables. The company has been in operation for three years, and sales have declined each year due to increased competition. The following information is available: 

Required 

a. Calculate profit and the value of ending inventory for each year under full costing. 

b. Calculate profit and the value of ending inventory for each year under variable costing. 

c. Explain how management of Sampson could manipulate earnings in 2021 by producing more units than are actually needed to meet demand. Could this approach to earnings management be repeated year after year?

Transcribed Image Text:

2020 2021 2022 Total Units sold 10,000 9,000 8,000 27,000 Units produced 10,000 10,000 7,000 27,000 Fixed production costs $350,000 $350,000 $350,000 Variable production costs per unit $ 100 $ 100 $ 100 Selling price per unit $ 350 $ 350 $ 350 Fixed selling and administrative expenses $300,000 $300,000 $300,000